The world of cryptocurrencies can be intimidating at first, but understanding the basics is key to informed investing.
1. Blockchain
Definition: It is a decentralized digital ledger that stores transactions in blocks, linked in an immutable chain.
Example: Bitcoin uses blockchain to record all transactions made on its network, ensuring security and transparency.
2. Cryptocurrency
Definition: It is a digital currency that uses cryptography to secure transactions and control the creation of new units.
Example: Bitcoin (BTC), Ethereum (ETH), and Solana (SOL) are some of the most well-known cryptocurrencies.
3. Wallet
Definition: It is software or a physical device that allows you to securely store and manage cryptocurrencies.
Example: MetaMask is a digital wallet for Ethereum, while Ledger is a physical wallet.
4. Token
Definition: It is a digital representation of an asset or utility that operates on a blockchain.
Example: A token can represent a voting right in a project or an asset in a game like Axie Infinity.
5. Exchange
Definition: It is a platform where you can buy, sell, or exchange cryptocurrencies.
Example: Binance, Coinbase, and Kraken are popular exchanges.
6. Mining
Definition: It is the process of validating transactions on a blockchain and creating new blocks. Miners are rewarded with cryptocurrencies.
Example: In Bitcoin, miners compete to solve complex mathematical problems and add blocks to the chain.
7. Tokenomics
Definition: It is the study of the economics of a token, including its supply, distribution, and utility within a project.
Example: A project with good tokenomics can limit supply to avoid inflation and increase the token's value.
8. Gas Fees
Definition: These are the fees paid to validators to process transactions on a blockchain.
Example: On Ethereum, gas fees increase when there is a lot of traffic on the network.
9. Staking
Definition: It is the process of locking cryptocurrencies in a network to support its operations and receive rewards.
Example: By staking Cardano (ADA), you can earn rewards while helping to maintain the network.
10. Smart Contract
Definition: It is a self-executing program on a blockchain that follows predetermined rules.
Example: A smart contract on Ethereum can be used to create a rental agreement without the need for intermediaries.
